Budgeting is key to becoming financially healthy and resisting the urge to overspend. Calculating all income and expenses with a spreadsheet or a visual budgeting tool (like Mint), is a good way to keep tabs on incoming and outgoing money. It allows you to visually see where all of your money goes each month, so you can make adjustments and cut backs where you need to. It is also important to keep good records of bills, credit card statements, and receipts. Once a solid budget is setup, you can adjustment it as you see fit. This will allow you to enjoy the goods and services that you really need, while getting rid of the unessentials. Budgets can also help you decide if you need to focus on cutting spending, or find new ways to increase your income.

Use a Secured or Prepaid Credit Card to Stay Out of Debt

If you are someone that has difficulty with overspending on your credit cards, you may want to try an alternative to an unsecured card. One way that you can stop yourself from falling into the credit card debt trap, is to switch to a prepaid card or secured credit card with a low limit. A reloadable card (or prepaid debit card) is set up to allow for the convenience of credit card usage without the temptation to overspend.

With prepaid cards, you make a deposit and all payments are deducted from this balance. This allows you to spend as you like, but does not allow you to overdraw on your account. This is important, as many people have difficulty dealing with the temptation of a high credit limit. Some prepaid cards can be loaded with fees that include customer service charges, ATM charges, and monthly charges. Certain prepaid cards also carry very high fees, but many are reasonable. Make sure you understand how fees can be deducted from your account, before you make the initial deposit!

Secured credit cards can offer easy approval, and can be a good option for someone who needs a credit card, but has poor credit. There are unsecured credit card offers targetted specifically towards people with bad credit, but the interest rates can be “very undesirable”. A few years ago, a credit card was created with the highest interest rate ever seen, at 79.9% interest! This card was targeted specifically to people with sub-prime credit. In this case, a secured credit card would be an easy to obtain alternative and would eliminate the risk of racking up a snowballing debt at an insanely high interest rate.

Setting Aside Money to Pay Down High Interest Debt

With a proper budget in place, you can visually see how high interest debt (like credit card debt), affects your bottom line. It can allow you to create a “fund” to pay down this debt. Credit card debt is one of the most expensive types of debt at an average of 15% – 20%. For the best results, it makes sense to pay down the highest interest debt first. For example, if you have $5000 in car loan debt and $1000 in credit card debt, you should spend the money from this “fund” toward the high interest credit card debt (even though the amount is smaller). In the long run, paying down debt that is accumulating at 20% interest makes much more sense, when compared to pay off auto loan debt that grows at 10%. Credit card debt is one of the most expensive types of debt that exists. In comparison, interest on a home mortgage can range from 5%-8%.

Negotiate Outstanding Bills with Creditors

If you have bills that have gone to collections, it makes sense to negotiate and settle. Many times creditors will accept a reduced lump sum payment to clear a debt, instead of taking the risk that you will default on the total amount. It is possible to negotiate with creditors yourself, but you may be a fish out of water when it comes to negotiations. Creditors have a lot of experience dealing with debtors, so you may be at a disadvantage. You may want to consult with a non-profit credit counselor who can give you unbiased advice or even help you work out a re-payment program.

This article was contributed by GreatCreditScore.org. The site provides information about economic news, strategies to invest, and techniques to build or repair credit.

Is it possible to stop a financial crisis before it starts, or are we doomed to some financial emergencies every so often? With some foresight, it might be possible to see a crisis before it happens, but is there any way we can stop them before they become a major issue? Unfortunately, finding ways to completely avoid a financial setback isn’t as easy as finding affordable health insurance plans.

The way the economy is right now, there is no reason to believe that every financial crisis can be averted. Who would have thought that the financial sector would have collapsed as far as it did, or that housing prices would have fallen so far, so fast?

However, the economy is growing at a rate of 2.5 percent in the past quarter. This is good news for those who are looking for work, or simply hoping to be back on sound economic footing. A strong economy can also provide insurance against having a financial crisis, or at least provide you with some recourse against it.

Saving money can be an easy thing to do when times are good. Therefore, we can avert some of the worst parts of financial crisis by saving money before we are forced to spend more than we make. By having a savings account, we give ourselves time to plan in case of a job loss. With unemployment at 9.1 percent, it is tough to find work these days.

Another sound idea is to have good insurance. Finding cheap insurance quotes online is easy and can help you stay above water should you ever have a medical emergency. However, there is no question that life can surprise us when we least expect it. You never know when your car might get hit on the highway, or the engine suddenly stops working. Without a warranty, there could be nothing you can do about it.

An unexpected pregnancy can cause financial chaos. Raising kids will cost a lot and can be hard enough to plan for even if you are expecting the child. What happens if a fire burns your house down, or further market deterioration cause the value of your home to go down even further? This can leave you crippled financially with no asset to sell in order to gain some of that money back.

Financial crisis can be avoided for a time, or its impact lessened through good planning. However, you should be aware that even the best planning can’t always help you out. You never know why you are going to be in a financial bind, or how bad it will be. Even having an emergency fund can’t help you in the worst of cases.